Energy storage firm tries no-cash-down approach

Published 6:02 am, Thursday, October 24, 2013

An idea that revolutionized the solar industry - selling a service, rather than hardware - could soon do the same for energy storage companies.

Stem Inc., a startup in Millbrae, has begun offering a money-saving storage service to big businesses and industrial customers, for no cash down.

Much like solar companies that used to focus solely on selling panels, Stem started out by selling its energy management and storage system outright. The system, which combines batteries with big-data analytics, can cut a customer's monthly utility bill by 10 to 50 percent, according to Stem.

But the system's up-front cost was high enough, and the technology new enough, that many potential customers balked. So now Stem will offer the system as a service, paid for through a monthly fee.

"What we're basically able to do is go to customers and offer something like what the solar companies do today," said Prakesh Patel, Stem's vice president of capital markets and strategy. "We hope to follow that same trajectory. We think this offering is pretty attractive."

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A $5 million investment from Clean Feet Investors, a group that funds clean-energy projects - will help pay for the equipment.

"Deployment capital is essential for Stem to get their technology in the hands of their customers - many of whom prefer a 'pay as you save' offering," said Jigar Shah, a principal at Clean Feet and founder of the SunEdison solar company.

The ability to avoid steep up-front costs has sparked explosive growth in the solar industry. Companies such as SolarCity, SunEdison, Sungevity and Sunrun lease panels to customers who buy the power but don't own the equipment.

The idea is starting to spread. ChargePoint, a company in Campbell that makes charging stations for electric cars, now lets customers pay for their stations a little bit at a time. So far, ChargePoint's Net+ Purchase Plan is available only to businesses and government agencies, not homeowners.

Patel sees the service model as a natural fit for energy storage.

Stem's system cuts the amount that customers pay in "demand charges," which for many businesses can be a big portion of the monthly utility bill. The amount of electricity a business draws from the grid can vary greatly over the course of the day, and demand charges reflect the utility's cost of meeting the peak electricity demand for each business, even if that peak is very brief.

Stem's system allows a business to tap a battery pack as demand rises. That smoothes out the amount of electricity the business pulls from the grid throughout the day, lowering the peak and reducing the demand charge.

Stem customers typically save enough to pay for the system in two to five years, Patel said. Stem has already installed its gear in 150 locations. But the initial cost, which depending on the size of the battery pack can approach $100,000, gives some potential customers pause. Hence the idea of eliminating the initial cost.

"It really allows us to enter any market, go to potential customers and say, 'No money down - why not give it a try?' " he said.

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